Section 197 / 197A of the Income Tax Act, 1961 is a provision which allows for a lower rate of tax to be deducted at source / no tax to be deducted at source, i.e. the lower rate of TDS / no TDS. In this article, we will be discussing Section 197 and the procedure of claiming low or no TDS.
Tax deducted at source is a system introduced by the Income Tax Department, where the person making payments like salaries, professional fees, commissions, interest on investments, payment of rent, etc. deducts a certain percentage as a tax on such income before making these payments to the receiver.
At the time of filing his returns and calculating the tax liability, the tax payer may realise that his tax liability is considerably less than what he has paid. In such events, he can claim the refund of the excess tax paid/deducted at source during a financial year. But in cases where the taxpayer feels that his final tax liability for the financial year is going to be nil or less than the TDS rate applicable on a particular income, section 197 / 197A allows him to apply for a lower rate of TDS / no TDS. This application is to be submitted to the assessing officer in the prescribed form 13. If he does not apply for the Lower / Nil TDS certificate, he can still claim a TDS refund by filing his annual return. Usually, it takes 1-6 months after he files the return. This can block his significant income with the tax department. TDS needs to be deducted even if the assessee is falling below the minimum tax bracket. In such cases, he can avoid unnecessary TDS by filing Form 15G / Form 15H to the banks or by submitting Lower / Nil TDS certificate to the deductor. The income tax department processes the refund along with an interest of 6% in some cases. Most of the refunds are made in electronic form, directly to the bank account of the Assessee.
TDS exemption is applicable when
On Receipt of the Certificate the Deductor
An application for lower TDS/No TDS u/s 197 is required to be made by the tax payer the income tax assessing officer.
The form used for this application is FORM 13. Various details are required to be furnished by the tax payer like
Banks deduct TDS in cases where the interest income of the individual on a fixed deposit is more than Rs 10,000 in a year. The bank includes deposits held in all its branches to calculate this limit. However, if your total income is below the taxable limit, you can submit form 15G or form 15H (in case of senior person) to the bank requesting them not to deduct TDS. Form 15G and Form 15H are self-declaration form furnished by the Assessee to his banker for nil deduction of TDS. These forms are valid for one financial year. Hence, one has to submit them every year for continuing the eligibility.
The certificate issued under Section 197 is only valid for the AY mentioned in the certificate unless it is cancelled or the date mentioned on the certificate expires.
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